A loss sustained by a trust on the disposition of property involving an affiliated person is not deductible. However, such a loss may give rise to a carry-over mechanism, with rules that vary according to whether the property concerned is depreciable property or non-depreciable property.
Such a loss is deductible if, for example:
- the trust is deemed to have disposed of
- property further to the immigration or emigration of the person, or further to a change in use of the property
- a stock option that has expired
- a debt obligation that has become a bad debt
- a share issued by a corporation that has gone bankrupt or that was insolvent at the time it was wound up
- the trust is exempt or ceases to be exempt from Québec income tax within 30 days following the disposition of the property
For more information, refer to the Guide to Filing the Trust Income Tax Return (TP-646.G-V).